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Last Updated: 07/12/2005
Is war bad for business?
John A. Tures

A scholarly debate has raged over the relationship between capitalism and conflict. Some contend that capitalists act as imperialists to make money from the business of war and open up markets abroad to be dominated. Others find that war is bad for business, leading to reduced profits and greater government control over the economy. These arguments are tested using data on economic freedom and conflict. Results indicate that while some economically free countries engage in internal and external conflict, these tend to be less severe in nature and less likely to occur than cases involving economically unfree countries.


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Years ago, gangsters put aside their feuds in exchange for profits, leading some to question whether war was “bad for business.”  Now, with the rise of capitalism and economic freedom, as well as the relative decline in conflict worldwide, one might wonder whether the tables have turned, and economic liberalism acts as a source for peace.


Such arguments seem to contradict capitalism’s critics.  Long ago, Machiavelli concluded that liberal democracies would be ideally suited for imperialism.  Because they commanded greater levels of popular legitimacy, their citizenry would have fewer qualms about providing manpower and supplies for armies, since they would be “people’s armies.”  Governments could channel competitive economic and political energies into fighting abroad to expand state power. Later, as Lenin argued that “imperialism is the highest stage of capitalism,” it became fashionable to associate big business with big international conflicts.  A lust for profits became synonymous with a desire for international domination.  More recently, political scientist Michael Doyle argued that liberal states deliberately targeted their illiberal counterparts to promote democracy and protect private property.


Such arguments explain the connection between liberal states and external conflict, but what about internal forms of conflict?  Jack Donnelly (1998: 159) argues that “free markets…produce gross economic inequalities.”  These domestic distortions are likely to produce grievances feeding insurgencies or societal protests.  Donnelly (1998: 156) goes on to paint economic liberals as opposed to strong and active human rights policies.  Therefore, governments with free markets may engage in repressive policies to ensure that economic operations remain undisturbed, triggering the potential for an internal backlash and possible war within the state.


But not all have concluded that respect for economic freedom produced conflict.  Joseph Schumpeter reached the opposite conclusion, finding that capitalism and imperialism mix like oil with water.  He contended that wars tend to impoverish national economies, with costs dramatically outweighing any potential economic gains from military pursuits.  Additionally, with the presence of free trade, states need not conquer another to have access to desired goods; the world marketplace assures that necessities are available for purchase.  Schumpeter also pointed out that states which embrace economic freedom have strong peace parties, less support for expansion, and reject politically dominant professional armies.  Conflicts, according to Schumpeter, arise from those who demand special protections from free markets and autocrats who only derive their legitimacy from a xenophobic nationalism.


Political scientist Rudolph J. Rummel agrees.  Long known for his work showing the connection between democracy and peace, Rummel conducted a five-year study which found support for the hypothesis that economically free states are less likely to engage each other in conflict.  He demonstrated that free market systems tend to encourage an exchange of goods and services, not gunfire. But his research only focused on 24 countries between the years 1976 and 1980.  A more recent study that included a larger number of countries would go a long way toward confirming the connection between capitalism and peace.


Other writings examine the role that regional economic integration could play in promoting peace and security for a region.  De Lombaerde (2005) writes about not only the role closer economic ties and interdependence can play for regions, and not just Europe; many of these links involve a lesser role for mercantilist policies involving a strong role for the state in the economy.


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John A. Tures is an assistant professor of Political Science at LaGrange College in Georgia. He has published articles in the Journal of Peace Research, International Studies Quarterly, the Journal of Conflict, Security and Development, American Diplomacy, the Whitehead Journal of Diplomacy and International Relations, the Journal for the Study of Peace and Conflict, and the Online Journal for Peace and Conflict Resolution.